Can Obama beat the jinx?

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The State of the Union is good, the president will undoubtedly say.

Still, second presidential terms are no fun. At least for investors, and parenthetically, the economy.

Tonight, President Obama gives his first State of the Union address of his second term in the White House. It's a good bet that the economy, specifically job creation, will be in the meaty part of the annual status report to the nation.

Obama won't just be fighting a divided Congress to enact his economic agenda. He'll be fighting history, too – in which investment returns, for example, look weak in most second presidential terms.

Charles Rother, who tracks investment performance at American Strategic Capital in Los Alamitos, looked at the last 29 presidential terms dating to 1897 and their investment performances in six assets key to the U.S. economy. They are: stocks of large and small companies; government and corporate long-term bonds; housing; and T-bills.

Rother found that second terms were clearly poor performers when compared with other four-year spans of a presidency. Six of the eight second terms were ranked in the bottom half for overall investment performance among the 29 terms tracked.

The worst four White House years for investments were Woodrow Wilson's second term, from 1917 to 1921; Richard Nixon's second term – the struggling economy took a blow when Nixon resigned and was replaced by Gerald Ford – ranked third worst.

The second term of George W. Bush – 2005-09 – was fourth worst. The four years preceding Obama's stay in the White House were punctuated by the financial/housing meltdown and the Great Recession.

But Obama can take comfort from looking at the two second terms that were far from investment clunkers – from presidents I'm pretty sure he'd like to emulate in an overall political success sense.

Republican Ronald Reagan's second term – 1985 to 1989 – was the second-best of 29 presidential terms tracked by Rother for those key American investments.

Fixed-income investments performed extremely well in this Reagan term as the economy emerged from the high-interest strangle that knocked inflation out of the business-cycle equation. Housing also prospered.

And ranking No. 4 best out of the 29 terms was Democrat Bill Clinton's second White House stint. Those four years saw across-the-board improvements in numerous investments, notably big-company stocks as the national economy zoomed higher.

Rother sees similarities in how both Reagan and Clinton operated, saying they were “problem solvers” as well as “pragmatic politicians.”

Both Reagan and Clinton had major economic accomplishments in their second terms: for Reagan, it was a tax reform act; for Clinton, welfare reform.

“They literally tried to do the right thing for vast amounts of Americans,” Rother said.

Rother thinks there's a chance that Democrat Obama can again break the second-term economic jinx.

For one, Rother says Democratic presidents have had a historically better record serving investors, especially the stock market.

Second, Rother says the economy is now on the mend and could strengthen further without a major disruption or policy mistake.

“We've come a long way,” the money manager says.

The president faces many challenges on the domestic front – from sluggish hiring and lingering high unemployment to desires to trim federal spending and prune budget deficits. Those budget cuts – short-run and longer-term – are not conducive to big economic growth, but could be well received by investment markets if the fiscal repairs agreed to by both parties and the president are viewed as meaningful and significant budgetary improvements.

Breaking the second-term investment jinx will not be easy. Step one for Obama will be laying out a plan in his State of the Union address.

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